Moreover, a Bank of Thailand official who asked not to be named foresaw the country's ability to record another net capital flow this year.

"In January, we attracted huge foreign direct investments and that should continue, especially into the automotive, integrated circuit and other industries, while Thai stocks are still attractive to foreign investors," the source said. "However, inflows for the mega-projects are unlikely to be significant this year."

Since 1997, foreign capital has flowed out of Thailand because of the currency devaluation that forced the baht down from its former fixed rate of Bt25 to more than Bt50 per US dollar. After severe corporate restructuring in the years following the crisis, Thai corporations recently regained their profitability. At the same time, foreign companies resumed direct investment to cash in on special tariffs enjoyed by the Kingdom in some export markets.

It was feared that intensifying political tension over recent weeks would reverse the inflow, and foreign money would once more begin draining out of Thailand.

However, Finance Minister Thanong Bidaya said yesterday he had not yet been informed of any irregularity in money flows.

He also expressed full confidence in the economic outlook, believing that gross domestic product will expand by between 5 per cent and 6 per cent this year.

"The tension should unwind in a short time," he said. "But it is worrying if it is prolonged, as this will affect investor confidence."

Thanong said he would closely monitor the economy while preparing for the hand-over of power to a new government. He vowed that during the transition period, the government would not endorse any new projects, to avoid criticism.

According to Bank of Thailand data, the country enjoyed net capital inflows of $6.62 billion in 2005. Equity portfolio investment reached $4.7 billion, while foreign direct investment of $2.7 billion was recorded.

The Kingdom last recorded a net capital inflow in 1996, when the figure reached $19.5 billion.

Ever since then, the country has been experiencing net capital outflows. In 1997, $4.3 billion left the country, rising to $15.5 billion in 1998. Lately, however, the outflows have slowed down.

"There were high capital inflows and the current-account deficit stood at $3.7 billion last year," Suchada Kirakul, senior director of the central bank's monetary policy group said yesterday. "The country's balance of payments showed a surplus of $5.42 billion last year, while its international reserves increased by $2.3 billion to $52.1 billion."

A central bank source said foreign investors are still confident in the Thai market, so they are investing a lot in Thai equities, while listed firms are recording better performance. The government has also introduced measures to promote stock investments.

In the third quarter of last year alone, portfolio investment reached almost $2 billion, almost equal to $2.8 billion in the first half of the year. However, in the fourth quarter, portfolio investment showed a small outflow of $61 million. In 2004, by comparison, portfolio investment recorded a net outflow of $561 million.

According to central bank data, foreign direct investment last year was $2.7 billion, much higher than the net inflow of $835 million in 2004.

The source said most of the influx was continuing investment in the automotive and related industries, with Japan the major investor.

There is also a capital inflow in terms of trade credits. Importers of oil and other items are receiving longer trade credits of more than 30 days, in line with import growth of 26 per cent. In 2005, inflows from trade credits and other investments were recorded at $2.5 billion.

The private sector also repaid foreign debts to record net loan outflows of $444 million in 2005, compared to $548 million in 2004.

In addition, the source said there was also a capital outflow from government sources of $1.84 billion last year as the government refinanced foreign loans by issuing domestic bonds. The figure was slightly higher than government-sourced capital outflow in 2004.

There were also capital inflows in state enterprises of $1.5 billion, compared with a net outflow of $1.4 billion in 2004.

The banking sector also recorded an outflow last year of $2.5 billion, compared to a net inflow in 2004 of $1.7 billion.

Anoma Sukkasem

The Nation